Question

The following accounts are taken from the accounting records of Dory Company at December 31, 2015 after adjustments:

Sales revenue	$250,000
Sales salaries expense	14,000
Administrative salaries expense	15,000
Depreciation expense: equipment	8,000
Purchases	160,000
Sales returns	1,000
Purchases returns	2,000
Freight-in	10,000
Inventory, 1/1/15	80,000
Retained earnings, 1/1/15	60,000

In addition, the following information is available:

·	The inventory on December 31, 2015, was $75,000.
·	Ten thousand shares of common stock were outstanding during the entire year. Dory paid dividends of $1.00 per share.
·	At the end of October, Dory sold its unprofitable restaurant component. From January through October, the component had incurred an operating loss (pretax) of $14,000. The sale was made at a loss (pretax) of $8,000.
·	The applicable tax rate is 30%.

Required:

Prepare a 2015 multiple-step income statement for the Dory Company.

Answer 1

DORY COMPANY Income Statement For Year Ended December 31, 2015
Sales revenue	250,000
Less: Sales returns	(1,000)
Net sales	249,000
Cost of goods sold	173,000
Gross profit		76,000
Operating expenses
Sales salaries expense	14,000
Administrative salaries expense	15,000
Depreciation expense: equipment	8,000
Total operating expenses		(37,000)
Pretax income from continuing operations		39,000
Income tax @ 30%		(11,700)
Income from continuing operations		27,300
Loss from operations of discontinued component (net of 14000*30% = 4,200 income tax credit)	(9,800)
Loss on sale of component (net of 8000*30% = 2,400 income tax credit)	(5,600)	(15,400)
Net income		11,900
Earnings Per Share Components of Income (10,000 Shares)
Income from continuing operations	2.73
Results from discontinued operations	1.54
Net income	1.19

Inventory, 1/1/15		80000
Add: Purchases	160000
Freight in	10000
Delivery cost of purchases	170000
Less Purchase returns	-2000	168000
Less: Closing stock		-75000
Cost of goods sold		173000